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Caroline Baum: Modern Monetary Theory flunks the smell test

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Need money? Just print more!

Perhaps you’ve heard or read something recently about Modern Monetary Theory. You’d have to be living on the Space Station not to have come in contact with the “theory,” as it were, that is sweeping the nation, aided and abetted by progressive members of Congress in their push to guarantee free everything.

Modern Monetary Theory, or MMT, is based on the notion that deficits don’t impose any constraints on countries that borrow in their own currency, such as the U.S. or Japan.

MMTers believe that adjustments to aggregate demand are the province of fiscal policy; that the government can spend money on public priorities, such as keeping everyone employed, without raising revenue; that the only limit on government spending is inflation; and that interest rates should be permanently set at zero.

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